> BANK RATE : **************** Bank Rate is the rate at which central bank of the country (RBI) allows finance to commercial banks. Bank Rate is a tool, which RBI uses for short-term purposes. Any upward revision in Bank Rate by RBI is an indication that banks should also increase deposit rates as well as Base Rate / Benchmark Prime Lending Rate. Thus any revision in the Bank rate indicates that it is likely that interest rates on your deposits are likely to either go up or go down. Bank Rate in India is decided by RBI. At present Bank Rate is 9%. ~> CRR RATE : ************** Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks. ~> REPO RATE : *************** Repo Rate is the rate at which commercial banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. ~> REVERSE REPO RATE : ************************ Reverse Repo rate is the rate of interest at which Reserve Bank of India (RBI) borrows money from commercial banks in the short term.. Commercial Banks are always happy to lend money to RBI since their money are in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to high interest rates. It can cause the money to be drawn out of the banking system. Due to this fine tuning of RBI using its tools of CRR, Bank Rate, Repo Rate and Reverse Repo.
Posted on: Sat, 17 Aug 2013 05:56:33 +0000
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